Daily Ticker

December Jobs Report: Good Economic News, Better Political News

The evidence has been clear for the last few months that the U.S. economy was accelerating in the second half, and toward the close. The jobs market, long a lagging indicator, is showing some signs of catching up. Expectations had been for Friday morning's December jobs release, thanks to the ADP report on Thursday that suggested the private sector created 325,000 jobs in the month. The ADP report tends to be somewhat exuberant in December, and doesn't account for the public sector, which has reliably been hacking jobs.

Still, the December report contained a fair amount of good news — for people on Main Street, and for the people in the White House. Let's look inside the report for some takeaways. And watch the accompanying video to hear The Daily Ticker's Henry Blodget interview First Trust Portfolios chief economist Brian Wesbury break down the numbers and what it means for the Presidential election.

Payroll Gains.The headline number, a gain in 200,000 payroll jobs, is the kind of figure common in robust recoveries but that has been quite rare in the past few years. December represented the 15th straight month of job gains. While the U.S. has a long way to claw back all the jobs that were lost in the recession that began in 2008, jobs are coming back. Since February 2010, the economy has added 2.654 million jobs, and it has added 1.64 million jobs since December 2010. December's figure represents the highest number of payroll jobs in the U.S. since March 2009.

The gains were spread through a variety of sectors. Transportation and warehousing industries saw gains of 50,000, driven in part by seasonal hiring—a line that should likely be taken with a few grains of salt. Retail added 28,000 positions — solid, but not spectacular. More significant were the additions in manufacturing (23,000), after a few months of relative idling, mining (7,000 jobs), health care (23,000). A few words of caution: employment in the large professional and business services sector barely budged in December. The average work week, and average hourly earnings both rose marginally. Taken together, the payroll reports shows an economy in which more people were working, for more hours, and at slightly higher wages in December 2011 than they were in November, and in December 2010. This dynamic helps support the creation of a virtuous circle: more workers earning more wages spend more money and do a better job keeping up with debts, which leads to more demand and more production, which in turn leads to more production.

Political Science. December's news certainly came as relief to the 200,000 people around the country who found payroll jobs in the month. And it certainly provides a measure of relief to one guy in Washington who is trying to hold on to his post. Should job increases continue at this piece, it's likely that, come election day 2012, President Obama will be able to avoid the stigma of having presided over a four-year period in which the U.S. economy lost jobs. Now, to the typical worker, and to the economy at large, it hardly matters whether the U.S. gains 100,000 jobs or lost 100,000 over a four-year period. But the question of net job gains and losses is potent one in a political season. It's tough to argue that the occupant of the White House is a job killer when the number of jobs rises by a couple of hundred thousand each month.

The conservative recovery continues. For the last few years, the private sector, which was so aggressive in cutting jobs in 2008 and 2009, has been the engine of job growth. Meanwhile, every month, contrary to popular belief, the government has been cutting positions. In December, the private sector created 212,000 jobs, while government cut 12,000 jobs. Since it bottomed out in February 2010, at 106.772 million payroll jobs, the private sector has added 3.156 million jobs. The private sector has added 1.92 million jobs in the past 12 months, a rate of 160,000 per month. Not great, but not bad. By contrast, since April 2009, government employment has fallen by 709,000. There's been a subtle shift. In July 2009, the private sector accounted for 82.7 percent of all payroll jobs; in December 2011 it accounted for 83.3 percent. Socialism? Hardly.

The trend isn't your friend.Every month, when BLS reports new monthly data, it goes back and re-checks the numbers for the prior two months. For much of the past year, the tendency has been to revise previously reported totals higher. That trend petered out a bit this month. Last month, October's number, originally reported as a gain of 80,000, was revised to 100,000. Looking at the figures again, BLS revised the October gain to an increase of 112,000. But November's figure, originally reported as a 120,000 gain, was revised lower, to a gain of 100,000. On net, BLs discovered there were 8,000 fewer jobs than it previously though.

Big Slack Attack.Despite the apparent good news, the household survey component of the release contains plenty of evidence of slack in the labor market. The labor force participation rate — the percentage of able-bodied adults in the workforce — actually fell in December, and 60,000 people dropped out of the labor force altogether. The now-infamous U-6, the alternate measurement of unemployment that takes into account people who are working part-time but would prefer to be working full-time and discouraged workers, fell to 15.2 percent in December. But that's still a remarkably high level.

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